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Russian Regional Telco VolgaTelecom (OJSC) Affirmed At 'BB-/ruAA-'; Outlook Stable

January 22, 2008 | Cbonds

Standard & Poor's Ratings Services said today that it affirmed its 'BB-' long-term corporate credit and 'ruAA-' Russia national scale ratings on Russian regional telecoms operator VolgaTelecom (OJSC). The outlook is stable.
"The ratings on VolgaTelecom are constrained by the company's reduced financial flexibility, modest free cash flow generation, and intense competition in the mobile segment," said Standard & Poor's credit analyst Alexander Griaznov.
The possible risks associated with ongoing industry and regulatory reform, as well as moderate economic characteristics of the service area also constrain the rating.
The rating continues to be supported by VolgaTelecom's resilient market position in its franchise area, increasing revenue diversification, and superior network quality. The ratings also take into account the positive dynamics in Russia's telecommunications industry, helped by robust GDP growth and an improving regulatory framework.
At June 30, 2007, VolgaTelecom had Russian ruble 18.4 billion ($0.75 billion) total adjusted debt.
"We expect VolgaTelecom to maintain a dominant market position in its key business segments, while focusing on improving efficiency and generating free cash flows," said Mr. Griaznov. "At this rating level, we do not expect leverage to materially increase from the current levels."
A weakening of VolgaTelecom's market position, a reduction in profitability, or a substantial increase in financial leverage would put pressure on the ratings. We will be closely monitoring the company's progress in refinancing its debt in 2008. The ratings could come under pressure should the company be unable to arrange the refinancing reasonably in advance.
The ratings could be raised if the company reduced leverage to a sustainable lower level and strengthened liquidity. At this point, however, there is no immediate upside potential.

Company: Rostelecom - Volga

Full company nameRostelecom – Volga
Country of riskRussia
Country of registrationRussia


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